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Condo association tries to fire bad property management company

Posted on Mon, Sep 26, 2011 @ 07:14 AM

Property management company received a shut-off notice for our "Trash Bill", as we had no funds to pay. One more month went by and they stated that "Trash is going to get cut off".  As being trash we asked if we could make payment arrangements on the "trash" and make personal arrangements for waste pickup. Turns out that what they termed "Trash" was our sewer and water line for our Fire Sprinkler system as well. At this point we had no money and member of condo association had to make payment arrangements and pay out of pocket to city. The management company did not inform that water was cut off as of 10/2010, nor that we had no condo association insurance. In May they acquired new insurance under the false pretense (Board not knowing) that we had no Fire Water. We had annual fire testing done and almost failed due to the fact that we had no water, board called city and got it taken care of same day. Management company's failure to let us know that this was a serious problem and put owners and tenants at risk, yet they say that we cannot terminate our contract. It was said also that we could be sued because "we" did not disclose to a new purchaser that there was no fire protection when she moved in last month. Is there anything that can legally be done on our part to protect ourselves?



Has anyone looked in the minutes? How can the Board not know? Theyre supposed to look at the financials monthly. I have my suspicions that the Board of directors did know. The Management company is always blamed some how. This doesnt make sense at all.

posted @ Monday, September 26, 2011 8:22 AM by Liliane Agra

If your management company has allowed this to occur it is a breach of contract. You can terminate a contract for breach of contract in general. But take your management agreement to a lawyer in your State to have him or her review the terms of the contract. Then take the recommendation of your attorney. But just as important is for your Board to get a list of all of the bills for services to the association and you call each vendor to see if you are current. Then look at the bank account for the association to see if you have the funds to bring everything current. Also get an accounting from your property manager and have an independent accountant aufit the books. Check you rReserve accounts as well to see if all the money is there. Also make sure your management company has liability insurance and that they have all the proper licenses (if required in your State)to operate. Good Luck 

posted @ Monday, September 26, 2011 8:24 AM by Patrick J. Cerillo, Esquire

I am on the Board of Directors and know for a fact with a thread of emails to prove it that the Board was never notified of the issues at hand. The water was cut off when the management company had full control of everything due to prior president. Myself and two others were just voted in at our annual meeting so NO we (the current directors) had no idea. Management company also wont let us see files prior to us taking over and will not send us copies of prior bills or current. So although it may not make sense unfortunately its true.

posted @ Monday, September 26, 2011 8:49 AM by Janelle

WOW! I am so sorry to hear that! What state are you in? Call the Attorney thats handling your legal work ASAP! They cannot withhold records. Good Luck!

posted @ Monday, September 26, 2011 8:58 AM by Liliane Agra

I am in Wasington state. We dont havan attorney and with no money in the account at all and no reserves we can't afford one. Trying to figure things out with no end in sight.

posted @ Monday, September 26, 2011 9:03 AM by janelle

First, it is a complete and utter failure of the BOARD not to be fully aware of the financial condition of the BUSINESS THEY RUN. Management companies are responsible to keep all financial information and REPORT to the Board. I don't believe that any management company would not do this, and if they try, why did the Board not contact them early on? 
Secondly, the Board had to review and enter into a contract with the management company, did anyone read that contract or not? If they did, or if they have a copy of that contract, see what it states. Mine gives us a 30 day notice for either party to terminate the contract with or without cause. READ YOURS. 
Third, if your management company has NOT advised the Board of the financial situation your in, then as the lawyer above stated, they are in breach of the contract and action can be taken. DOES YOUR ASSOCIATION HAVE A LAWYER? If so, get him involved now. If not, get one now. 
Forth, what do your financial look like? Does anyone know? Who's watching YOUR money? If the Board isn't, your writing blank checks to anyone who wishes to fill in the amount and cash in! 
Your financials are priority ONE for your association. Do you have a fully funded budget? Is the operating account adequate (I doubt it if you have these problems)? Do you have funds in the Reserve accounts? Are they enough to take care of you building? This needs to be reviewed now by someone who understands a financial report. I've found that many Board members don't even know how you read their financials. Get help if needed. 
Fifth, if your BOARD has allowed this to go on unchecked. You need to fire them too! Get a Board who will pay attention to everyones needs and make those hard financial decisions accordingly.

posted @ Monday, September 26, 2011 9:14 AM by cebo

I just read your additional postings. Congrats for getting involved. Obviously, you have a bad situation to deal with. 
Now, having NO FUNDS, you MUST get a lawyer. Contact some and work out an agreement to make payments or do a special assessment of the owners. You cannot afford NOT TO. Also, in some situations, a prior Board or Boards may be sued personally for the poor management of the Association. This isn't something I can really advise but a lawyer can review past activity of the Board(s) and determine if impropriety is involved. 
The next hardest thing you should do is review those financials and start a program to fund your budget. You more that likely will need to do special assessments to build an operating account that will pay the bills. If your association has been bled dry, your in for the long haul, needed funds can be rather large to keep things going. 
The time to act is now because those before you didn't.

posted @ Monday, September 26, 2011 9:28 AM by cebo

Suggestions that the board should consider IMMEDIATELY  
- establish a bank account with online banking and direct deposit ease with a known financial institution.  
Board must have EIN no and likely required to provide proof that they are the directors/officers of a State authorized business entity. Have copy of recorded documents for bank, as may be required. 
- notify members to deposit October and future assessments in this account.  
- retain attorney FAMILIAR with condo law for legal advise. Depending on specific location, i can provide contact for CAI member attorneys in your local area. 
- once you have opened bank account, open a PO Box at Post Office for members and provide this info to members and vendors. 
State of Washington has a Community Associations Institute chapter (CAI) located in Lynnwood. The phone is 425-778-6378 and Exec Dir can be reached also by email at mmedlock@wscal.org. Do keep in mind that CAI both provides great educational opportunities and is a trade organization so it is not in a position to "take sides."  

posted @ Monday, September 26, 2011 9:39 AM by Nancy Jacobsen

We are in the process of getting them off the bank account now that we have found out what bank we are with so they wont have access to the money. Its just going to be hard 2/6 units in forclosure, owners not paying. The other board member and myself have literally been paying bills and making arrangements with utilities to keep everything afloat now.  
Our other board president forclosed and literally moved out in the middle of the night.  
We are in it for the long haul but unfortunately for them they have an ex assistant to a private investigator on the board. Stressful but will get taken care of. Thank you all for input.

posted @ Monday, September 26, 2011 9:40 AM by janelle

Correction to CAI Exec Dir email - it should have been mmedlock@wscai.org  

posted @ Monday, September 26, 2011 9:42 AM by Nancy Jacobsen

You can contact your county Bar Association for a pro bono referral or a legal aid attorney to get started. You may also have help from your State Attorney General's office.  

posted @ Monday, September 26, 2011 9:52 AM by Patrick J. Cerillo, Esquire

Why do so many people automatically say fire the management company they did not do their job. 
The management company only does as instructed by the Board, and if the Board did not approve a proper budget to account for units not paying, then it is the Board's fault not management. Although the management would normally assist in putting together the budget, it is ultimately up to the Board to adopt the budget.  
It sounds like management has already told the board there is no money -- when they advised the board there is no money to pay this or xyz bills. I'm not sure why the Board didn't react sooner to prevent cut off. The board could have held a meeting to modify the budget but at least could have passed an assessment to cover whatever shortfalls there are. 
Under no circumstances is it up to a management company to loan an Association money to keep them afloat. 
Perhaps the management company is not cooperating because they are not getting paid (because of the lack of funds) and although they have done what they can, they are now going to be the scape goat in the whole matter.

posted @ Monday, September 26, 2011 10:25 AM by Joyce Nord @ thecondocommando.com

As always in working with client boards, I strongly urge all boards to REQUIRE that the directors have signature on all bank accounts. Make this part of the preliminary conversation before entering into a contract. 
Why is this necessary? Because by Federal law, a bank is not to add or remove a name unless the requesting party is a signature on the account. Banks can refuse to even identify that there is a bank account for a business without this or by court order. Unfortunately, have had too much experience with this problem for client associations.  
Like all professions - the problem companies get the press and the attention. Most management companies are owned by honest, dedicated people. The largest challenge is to have educated staff - they do the daily work for an association.  
As soon as you can focus on related items - please write your State and local officials about your problem. CAI often introduces good customer protection legislation that doesn't get enacted because officials respond to voters and their concerns/experiences. If possible, because of the extremely threatened position the members were exposed to - set up a meeting with these officials. Invite them to a meeting of the board specifically to hear the problems faced by the members - water shut-off, etc.  
The attorney you retain needs to review the necessary disclosures to purchasers that the Condo must provide. You also need advise on documentation needed to obtain reimbursement eventually. It should be recorded as a loan to the condo.  
Separately, let both the State and your US legislators know the problem regarding foreclosure. CAI members recently presented to several Congressional members the financial impact this is having on the condos.  
Again, regards - Nancy Jacobsen

posted @ Monday, September 26, 2011 10:32 AM by Nancy Jacobsen

@Joyce - The management company had full control of EVERYTHING since 2008, we had no idea the previous board signed everything over. We didn't have meetings of the association, we didn't have budgets for those years either from what and email from the management company stated in an email. As well the management company made sure their check was the first one written on the 1st of the month in addition to additional fees for "other services provided". We paid special assessments as members but once on the board first hand found out what was happening.  
@Nancy- the only reason I asked for help on this was due to the fact that all individuals involved from developer/declarant, management company have civil suits against them for doing this to other people all within a two-3 year time frame. Thank you so much for your advice on this situation as well as he others who gave positive input on the situation.

posted @ Monday, September 26, 2011 11:13 AM by janelle

As a manager, I can only tell the Board what they SHOULD do, I don't have the power to force them to do something or make decisions for the Board. 
If your Board delegated their authority, they are at fault not the manager. 
If a budget was not adopted, it is the Board's fault, not the manager. 
The fact that the manager shared this information in written form would make me suspect they are not trying to hide it...perhaps because they told the board and the board did not act. If a manager screwed something up so important, they would not benefit from placing the fact they screwed up in writing. 
You see where I'm going with this? 
If you sue your Board, you all pay -- because while the board members were serving they were protected by Association policies and cannot be held liable usually. There are very few instances in which they could be personally held liable. 
While you blame the Board, owners should have gotten involved sooner...this has been going on since 2008? Over 3 years? 

posted @ Monday, September 26, 2011 11:27 AM by Joyce @ thecondocommando.com

I notice that thecondocommando raises the question of Board members not being liable, as they are protected by the condo insurance. Are they protected if their actons are in conflict with the condominium rules? I am not a lawyer, but I don't think so.

posted @ Monday, September 26, 2011 12:34 PM by Katherine Kay

This would not be an issue with the rules. Perhaps the CC&R's but most often, yes they would still be covered under the insurance if there is insurance and could not be held liable since whatever action they took was directly as a result of being on the Board. In effect, their decisions are protected by the Association's policies if the issues arise later. The very limited times a board member can be held personally liable is if they obtained something for their own personal benefit (i.e., work done to their unit by a contractor, kickback, etc) from their service on the board or stole funds.

posted @ Monday, September 26, 2011 12:49 PM by Joyce Nord @ bestcondomanager.com

The previous board had no D&O insurance at all during the years they were in place. 
They signed over responsibilities that the directors have to the management company and it’s in the 2008 turnover minutes (that's why it’s being going on close to 3 years. 
They left without stepping down or notifying of their intentions to do so that a new board could be put in place (they literally moved out in the middle of the night so that no one would see them), by doing that they abandoned their responsibilities and did not do what was best for the Association. 
Therefore they are liable. The thing is though that I am not wanting to SUE anyone. What I want is to repair the damage done and get the ball rolling back in the right direction.  
I don’t blame people who aren’t responsible. Are we “responsible” for not being aware, maybe partially but as Homeowners a Board of Directors is put in place to do what’s right for the Homeowners and the property, not to hand the sheep to the wolves and see what comes about. If they didn’t want the responsibility they shouldn’t have signed up for the job. 

posted @ Monday, September 26, 2011 12:58 PM by janelle

Sounds like someone failed to require management co to account for actions, ie... reporting on financials and income-Expenses on a monthly basis. 
That is the reason for the board. 
I always wince when someone says, " see an attorney". 
By the time you need an atty., you're already in trouble, and the expense is going to hurt. 
Board members need to realise, they are representing all the home owners, even those who can be unreasonable. 
Sometimes, we need help in understanding all the items that need to be monitored. It can realy be a thankless job. 

posted @ Monday, September 26, 2011 3:05 PM by mels

This is exactly what is wrong with the whole condo system. You have a small associations with a large percentage in default 2/6, 33% including the former president who skipped out in the middle of the night. How many thousands of dollars of unpaid fees does this represent? The inability to pay for basic services is a direct result.. Your financial destiny is hitched on to people who either lost their property or decided it wasn't worth keeping it and defaulted strategically. 
One third of the budget is gone. It could be more if the defaulters failed to pay for some time. 
The management co could be under advise of counsel to only respond to a subpeona knowing that litigation here and possibly a criminal investigation are at hand to explain where the money went. 
You need competent counsel immediately. You also need a forensic accountant to look at the books and do an audit of where the money went. Your local district attorney's office might be the place to start the investigation. 
I repeat condos can cause massive problems and financial damage to owners.

posted @ Monday, September 26, 2011 8:26 PM by condohater

Completely agree with condohater. Yesterday I got in contact with an Attorney is willing to help and when he requested to meet with the company and told them what all he needed to view at the meeting their response was " You will meet with us when we have time", and even stated that certain items they didn't have. So yeah sounds like we need to go a step higher on this one.  
Doesn't help that out of 9 units/ 2 are in foreclosure, one unit 4000 behind on dues and 3 owned by an Owner who is friends with the company. There is no coming out of this good but I am hoping to get the BOD on the right track so that when step down the next BOD can be at a good place.

posted @ Tuesday, September 27, 2011 8:30 AM by janelle

Thank you. 
Your Post is very usefull for all peopel they are conneted with your network and other peopel will be show your article or blog. I am always reading your post. 
Nice and valuable information you have sharing. 

posted @ Monday, October 03, 2011 6:11 AM by Property Rental Management

I am president of my assoc and when I came on board I had a similar problem. I ended up firing the management company and our lawyer. My suggestion is make sure that ALL of your records are on the property. The management company has no right to have any. Put this requirement in writing by certified mail. Next, Have the police with you and remove the property manager and change the locks. Let them go after you. Meanwhile you have gained back control and get your assoc back on it's feet. Hate to say it but you will need a lawyer. Make sure you file a civil case including suing for costs and lawyer fees. It may take awhile but at least you can get things back to normal. something you not be able to do with this management still running things. A management company is simply another vendor that works for the assoc and at the direction of the board. As with any bad vendor you can fire them.

posted @ Monday, October 10, 2011 11:20 AM by Mark

I have seen some people that don't take things seriously enough when it comes to fire protection in Toronto. When I see those things it really worries me because of all the people it could potentially harm. http://www.com-plex.net

posted @ Monday, October 14, 2013 4:37 PM by Sean Valjean

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